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Factors Setting the Tone for Starbucks (SBUX) Q1 Earnings

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Starbucks Corporation (SBUX - Free Report) is scheduled to report first-quarter fiscal 2020 results on Jan 28, after the closing bell. In the last reported quarter, the company’s earnings came in line with the Zacks Consensus Estimate.

Q1 Expectations

The Zacks Consensus Estimate for first-quarter earnings is pegged at 75 cents, flat with the prior-year period. Over the past 30 days, the company’s earnings estimates have been stable. For quarterly revenues, the consensus mark is pegged at $7,089 million, suggesting growth of 6.8% from the prior-year quarter.
 
Factors at Play

Robust performance of Americas and Channel Development segments is likely to get reflected in Starbucks’ first-quarter top line. The company’s fiscal first-quarter performance is also likely to have benefited from new store additions, expansion in China and positive global comparable store sales.

The Zacks Consensus Estimate for revenues for Americas segment and Channel Development segment is anticipated to witness year-over-year improvement of 4% and 8.3% to $525 million and $4,989 million, respectively.

Moreover, China and the Asia-Pacific region have been gaining from unit growth, rising brand awareness and increased usage of the digital/mobile/loyalty platforms. Moreover, the company’s partnership with Alibaba is also likely to show on the company’s fiscal first-quarter performance.

However, margin contraction is likely to have impacted the to-be-reported quarter’s performance. Rise in costs thanks to investment in digitalization is likely to have weighed on the company’s operating margin.

What Does the Zacks Model Say?

Our proven model does not conclusively predict an earnings beat for Starbucks this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that's not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Starbucks has an Earnings ESP of +1.00%.

Zacks Rank: The company has a Zacks Rank #4 (Sell).

Starbucks Corporation Price and EPS Surprise

Stocks With Favorable Combination

Here are some stocks from the Restaurant space that investors may consider as our model shows that these have the right combination of elements to post an earnings beat in the upcoming releases:

Darden Restaurants, Inc. (DRI - Free Report) has a Zacks Rank #3 and an Earnings ESP of +1.07%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Denny's Corporation (DENN - Free Report) has a Zacks Rank #1 and an Earnings ESP of +5.88%.

Jack in the Box Inc. (JACK - Free Report) has an Earnings ESP of +5.11% and a Zacks Rank #2.

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